Optimism erupts in D.C.; talks continue

WASHINGTON, D.C. — Senate Majority Leader Harry Reid (D-NV) walks to his office after meeting with U.S. President Obama and other Congressional leaders at the White House, on Capitol Hill December 28, 2012 in Washington, D.C.. The Senate was back in session on Friday to deal with the looming 'fiscal cliff' issue. Getty Images

Getty Images

WASHINGTON, D.C. — Speaker of the House John Boehner (R-OH) leaves the White House after meeting with U.S. President Barack Obama and other Congressional leaders December 28, 2012 in Washington, D.C.. Obama and members of Congress continue to seek a solution to avert the possibility of large tax increases combined with deep spending cuts, also known as the 'fiscal cliff'. Getty Images

Getty Images

WASHINGTON, D.C. — U.S. President Barack Obama said he was 'modestly optimistic' while making a statement on fiscal cliff negotiations following a meeting with Congressional leaders at the White House December 28, 2012 in Washington, D.C.. Obama and members of Congress continue to seek a solution to avert the possibility of large tax increases combined with deep spending cuts also known as the 'fiscal cliff'. Getty Images

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Senate leaders met with President Obama at the White House on Friday and said they would work through the weekend and bring senators back into session on Sunday, in hopes of approving an agreement to protect taxpayers, the unemployed and the nation's economy from the worst effects of the "fiscal cliff."

In a televised statement to reporters late in the day, Obama said he had a "good and constructive" meeting with the four congressional leaders. "The hour for immediate action is here. It is now,"' Obama said. He added, "I'm modestly optimistic that an agreement can be achieved."

At the White House, Senate Majority Leader Harry Reid (D-Nev.) and McConnell agreed to try to move forward with a stripped down package.

According to people briefed on the meeting, the package would protect millions of taxpayers from the bite of the costly alternative minimum tax and keep unemployment benefits flowing to 2 million people who would otherwise be cut off in January. It is also likely to protect doctors from a steep cut in Medicare reimbursements set to hit in January.

The two sides were still haggling over where to set the threshold for income tax hikes and how to handle the tax on inherited estates. On income taxes, Obama has proposed letting tax rates rise on income over $250,000 a year, but Republicans have in recent days expressed interest in a compromise that would lift the threshold, allowing taxes to rise only for households earning more than $400,000 a year - Obama's most recent proposal in fiscal cliff negotiations with Boehner.

On the estate tax, Republicans want to maintain the current structure, which exempts estates worth up to $5 million and taxes those at only 35 percent. Obama has proposed a $3.5 million exemption, and a tax rate above that amount of 45 percent.

Obama had insisted that Republican leaders support his plan to let taxes rise on those earning more than $250,000 a year or to offer a concrete plan that could win Democratic support.

As congressional leaders from both parties gathered for a high-stakes meeting at the White House, Obama laid no new offers on the table, according to people familiar with the meeting.

Instead, Obama insisted that the package he outlined would pass the House and the Senate if Republican leaders would stop blocking the legislation and put it to a vote, permitting moderates in both parties to work their will.

Those gathered around the table agreed that the next step should be for the Senate to take bipartisan action, the aides said.

After a little more than an hour of talks, Boehner and House Minority Leader Nancy Pelosi (D-Calif.) were seen leaving the White House without speaking to waiting reporters. A White House official said the talks began about 3:10 p.m. and ended at about 4:15 p.m.

Reid and McConnell returned to the Capitol, where more than 20 senators from both parties crowded around McConnell on the Senate floor.

Sen. Jon Kyl (R-Ariz.), the senate's second ranking Republican, said McConnell told fellow Republicans that he was "optimistic" a deal was developing.

However, McConnell shared with colleagues no details of the elements of a possible agreement.

When Reid addressed the full Senate moments later, he called the White House meeting "instructive."

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